Health Care Stakeholders Larry Merlo President & Chief - - PowerPoint PPT Presentation
Delivering Value for All Health Care Stakeholders Larry Merlo President & Chief Executive Officer Agenda Our Value Proposition Has Never Been Stronger Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a
Larry Merlo President & Chief Executive Officer
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Agenda
Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth Our Value Proposition Has Never Been Stronger
…enabling us to deliver superior outcomes at a lower cost
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The Most Extensive Suite of Leading Assets…
Patients Payors Providers Retail Mail Long-Term Care Infusion Medical Claims Editing Digital Retail Clinics Specialty Clinical Programs Cost
Management Tools
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Our Integrated Model Drives More Affordable, Accessible and Effective Care
Maintenance Choice Specialty Connect Pharmacy Advisor Higher penetration rates of programs, resulting in better outcomes Clinical rules engine with powerful analytical capabilities, providing real- time, actionable information Enabling single patient record and simplicity of single digital platform to manage all prescriptions
Full View of Patient Health Engagement Engine Appropriate Utilization, Better Outcomes Proprietary Programs
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Retail Pharmacy Competitors
Health Systems Providers Patients Senior Living Employers Government Health Plans
Traditional Competitor Touchpoints Are Limited
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PBM Competitors
Health Systems Providers Patients Senior Living Employers Government Health Plans
Traditional Competitor Touchpoints Are Limited
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Health Systems Providers Patients Senior Living Employers Government Health Plans
Our Suite of Assets Provides Touchpoints Across All Health Care Stakeholders
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Our Competitive Advantage:
Premier company with the ability to impact patients, payors and providers with innovative, channel-agnostic solutions Unmatched CVS Pharmacy value proposition for all payors Unparalleled scale in the U.S. making us a low-cost provider Largest retail clinic operator, providing convenient, cost-effective care Deep clinical expertise and insights enable us to help deliver superior
Leading pharmacy provider in long-term care, enabling broader patient reach across the care continuum Broadest specialty capabilities to holistically manage patients in growing market Site-of-care management capabilities to move patients to more cost-effective sites
Continued Selling Season Success …
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Refer to endnotes for additional information.
…Fueling Growth in PBM Lives and Enterprise Volume
62 68 72 80 89
2013 2014 2015 2016E 2017E PBM Lives Under Management
(millions)
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1,045 1,075 1,170 1,360 1,380
2013 2014 2015 2016E 2017E Enterprise Rx Volume
(Rx dispensed, millions)
Refer to endnotes for additional information.
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Agenda
Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market
Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
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Annual Growth Rate
(%, 2015-2025)
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4.5% 5.8% 6.7%
Gross Domestic Product Health Expenditures
Drivers of Trend
Growth in Health Care and Pharmacy Spend Projected to Outpace GDP Growth
− Growing prevalence of chronic disease
− Growth in specialty − Drug price inflation Prescription Drug Expenditures
T R E N D M A N A G E M E N T
Refer to endnotes for additional information.
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Clients Continue to Value PBMs as an Indispensable Solution to Rising Costs
Disease/Condition Management Full Replacement CDHP Initiatives to Improve Well-Being Increased Employee Cost-Sharing Pharmacy Management Techniques
Clients’ Top Rated Cost Control Methods
68% 34% 34% 31% 30%
T R E N D M A N A G E M E N T
Refer to endnotes for additional information.
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Suite of Capabilities Improving Health Care Affordability
Utilization Management Formulary Management Network Strategies Generic Programs
Cost Management Solutions
Site-Of-Care Management Medical Claims Editing Real-Time Surveillance Clinical Programs
Cost management solutions have lowered client trend to
T R E N D M A N A G E M E N T
Refer to endnotes for additional information.
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Mitigated Branded Price Increases With Cost Management Solutions
9.3% 10.0% 11.5% 14.3% 12.4% 8.7% 9.1% 4.9% 5.1% 2.8%
2011 2012 2013 2014 2015 Branded Rx Price Growth
(total market, IMS Health) Net Gross
T R E N D M A N A G E M E N T
Refer to endnotes for additional information.
We See Compelling Opportunities in a Robust Health Care Market
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Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
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Government Accounts for Two-Thirds of Health Insurance Spending
Government Health Insurance Spend
($, trillions)
1.6 2.1 2.9
2015 2020E 2025E
% of insurance spend 66% 67% 68%
Key Drivers
− Medicare − Medicaid
but have higher utilization
G O V E R N M E N T
Refer to endnotes for additional information.
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Demand for Cost-Effective Care Will Remain Despite Uncertainty Around Health Care Reform
U.S. Uninsured Rate Future Outlook
and replace
14.3% 11.2% 8.3%
2012 2014 2016E
CVS Health can pivot to address policy changes with the right solutions
G O V E R N M E N T
Refer to endnotes for additional information.
Medicare Enrollment
(lives, millions)
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CVS Health Advantages
CVS Health Well-Positioned to Capitalize
Med D members
− SilverScript is the largest PDP with 5.6 million members − Also support Med D/MAPD offerings of more than 40 health plans
23% of prescriptions dispensed
provider in the long-term care market
G O V E R N M E N T
54.0 62.6 71.6
2015E 2020E 2025E
Refer to endnotes for additional information.
We See Compelling Opportunities in a Robust Health Care Market
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Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
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Movement Towards Value-Based Care Creates Need for New Cost Management Solutions
Provider Reimbursements Tied to Value
45% ~60%
Today 5 Years From Now
Despite the anticipated shift
based payments, only 26%
meeting their goals to lower health care costs Expectation is that value-based care will be key determinant of success
V A L U E - B A S E D C A R E
Refer to endnotes for additional information.
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Multitude of Ways We Provide Cost-Effective Care
Providing health care services, including wellness and chronic care support
MinuteClinic
Home or alternate-site infusion services can dramatically lower costs
Infusion
Avoiding costly hospital readmissions by preventing lapses in adherence
Care Transitions
Driving Med D Star ratings through clinical capabilities
Med D Star Ratings
Powered by Health Engagement Engine and brought to life through face-to-face interactions
Clinical Programs
Unique integrated programs, 90-day programs, formulary designs and value-based contracting
Pharmacy Care
V A L U E - B A S E D C A R E
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We See Compelling Opportunities in a Robust Health Care Market
Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
Unsurpassed Procurement Scale Through Enterprise Dispensing Volume
2016 Estimated Rx Volume
(Rx dispensed, millions)
CVS Health Advantages
100 120 140 350 930 1,360
OptumRx Anthem + Cigna Aetna + Humana Express Scripts Walgreens
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Unsurpassed scale and expertise allows us to be an efficient purchaser of pharmaceuticals Procurement scale further enhanced by Red Oak Sourcing
S I Z E A N D S C A L E
Refer to endnotes for additional information.
Ability to Aggregate Claims Volume Creates Value for Clients
CVS Health Advantages 2016 Estimated Claims Volume
(Rx managed, millions)
500 650 1,000 1,275 1,385
Anthem + Cigna Aetna + Humana OptumRx Express Scripts
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Managed claims volume supports negotiations for:
− Rebates − Price protection − Formulary placement
More than 90% of rebates overall are passed back to clients Competition in drug classes allows us to utilize scale more effectively
S I Z E A N D S C A L E
Refer to endnotes for additional information.
We See Compelling Opportunities in a Robust Health Care Market
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Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
Consumer-Directed Health Plans Gaining Traction
CDHP Prevalence
(% of large employers)
Drivers of Trend
62% 84% 92%
2010 2013 2016E 2019E
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As member cost burden increases, mindset shifting from patient to consumer
health care costs
exchanges choosing CDHPs
Offered/Considering Offered
R E T A I L I Z A T I O N O F H E A L T H C A R E
Refer to endnotes for additional information.
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We Own the Last Mile of Care Through Our Unmatched Patient Touchpoints
Retail Pharmacy Mail Specialty Retail Clinics Long-Term Care Infusion
No matter the road, we can shape behavior and drive outcomes
R E T A I L I Z A T I O N O F H E A L T H C A R E
We See Compelling Opportunities in a Robust Health Care Market
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Growing Role of Digital Increasing Consumerism / Retailization of Health Care Focus on Trend Management Evolving Role of Government in Health Care Movement to Value-Based Care Slow, But Inevitable Ongoing Benefits of Size and Scale
1 2 3 4 5 6
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CVS Health Digital Strategy Focused on Three Pillars
Adoption Ongoing Innovation Integrated CVS Health Experience
Enhance customer experience, drive loyalty and improve outcomes
D I G I T A L
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Agenda
Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth How We’ll Drive Long-Term Enterprise Growth
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Our Strategic Business Imperatives
Aggregate Lives Grow Share Execute With Excellence Drive Innovation Enterprise Focus Actions to achieve growth may change, strategic imperatives remain
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Actions to Capitalize on Market Dynamics
Partner More Broadly New, Innovative PBM Products Enterprise Streamlining Initiative Return Value to Shareholders
Sustainable Enterprise Growth
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Actions to Capitalize on Market Dynamics
Partner More Broadly
capabilities to enhance CVS Pharmacy value proposition
– Bundled service offerings – Will make us partner of choice
edge in value-based care
with Optum
Key Actions
Sustainable Enterprise Growth Partner More Broadly New, Innovative PBM Products Enterprise Streamlining Initiative Return Value to Shareholders
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Actions to Capitalize on Market Dynamics
New, Innovative PBM Products
Sustainable Enterprise Growth Partner More Broadly New, Innovative PBM Products Enterprise Streamlining Initiative Return Value to Shareholders
stages of care
including performance-based networks
Key Actions
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Actions to Capitalize on Market Dynamics
Enterprise Streamlining Initiative
Sustainable Enterprise Growth Partner More Broadly New, Innovative PBM Products Enterprise Streamlining Initiative Return Value to Shareholders
solidify low cost provider status
– Store rationalization – Enhance efficiency of corporate shared services – Optimize pharmacy delivery platform
in cumulative savings by 2021
Key Actions
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Actions to Capitalize on Market Dynamics
Return Value to Shareholders
Sustainable Enterprise Growth Partner More Broadly New, Innovative PBM Products Enterprise Streamlining Initiative Return Value to Shareholders
shareholder returns
growth
Key Actions
Today’s Key Takeaways
Driving More Affordable, Accessible and Effective Care
In an era of rising costs, we are the optimal partner to deliver savings and help improve outcomes for health care stakeholders
Driving Outcomes and Savings
Pharmacy has the highest frequency of interaction, and our unmatched patient touchpoints across the enterprise help shape behavior
Providing the Front Door and the Last Mile
We can partner with all PBMs and health plans, leveraging our enterprise assets and capabilities to meet their individual needs
Best Partner for PBMs and Health Plans
Maximize shareholder value with an enterprise mindset; generate strong cash flow and employ a disciplined approach to capital allocation
Positioned for L-T Enterprise Growth
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Our exclusive programs are seamlessly integrated through our Health Engagement Engine, providing better member experience and results
Integrated Pharmacy Care
Delivering Value for All Health Care Stakeholders
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Endnotes
Slide 9 1. As of December 2, 2016. 2. Gross new business revenues exclude Medicare Part D SilverScript individual products. 3. Client retention rate is defined as: 1 less (estimated lost revenues from any known terminations in that selling season year plus annualization of any mid-year terminations, divided by estimated PBM revenues for that selling season year) expressed as a percentage. Both terminations and PBM revenues exclude Medicare Part D SilverScript individual products. Slide 10 1. Enterprise dispensed Rx include prescriptions filled at CVS Pharmacy, mail order and specialty prescriptions filled at CVS Caremark, and prescriptions filled by our long-term care pharmacies. 2. All dispensed CVS retail and mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal 30-day prescription. 3. Source: CVS Health internal analysis. Slide 13 1. Source: CMS, National Health Expenditure Projections (figures as of July 14, 2016). Slide 14 1. Source: National Business Group on Health, 2017 Large Employers’ Health Plan Design Survey, Figure 11.
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Endnotes
Slide 15 1. Source: CVS Health internal data analysis. 2. Utilization trend based on internal commercial cohort (Health Plans and Employers). 3. Trend is reported net of rebates. Slide 16 1. Source: IMS Institute for Healthcare Informatics, Medicines Use and Spending in the U.S., Chart 3. Slide 18 1. Source: McKinsey proprietary research. 2. Includes Medicare, Medicaid, and other federal, state programs (e.g. Children’s Health Insurance Program, Department of Veterans Affairs, Department of Defense). Slide 19 1. Source: CMS, National Health Expenditure Projections, Table 17: Health Insurance Enrollment and Enrollment Growth Rates, Calendar Years, 2009-2025 (figures as of July 14, 2016). Slide 20 1. Source: CMS, National Health Expenditure Projections, Table 17: Health Insurance Enrollment and Enrollment Growth Rates, Calendar Years, 2009-2025 (figures as of July 14, 2016). 2. Source: CMS (membership figures as of October 7, 2016). Slide 22 1. Source: McKesson, Journey to Value: The State of Value-Based Reimbursement in 2016, Figure 8. 2. Reimbursements tied to a value-based payment arrangement based on providers who use other models than 100% fee- for-service only.
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Endnotes
Slide 25 1. Enterprise dispensed Rx include prescriptions filled at CVS Pharmacy, mail order and specialty prescriptions filled at CVS Caremark, and prescriptions filled by our long-term care pharmacies. 2. All dispensed CVS retail and mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal 30-day prescription. 3. Source: CVS Health internal data analysis. Slide 26 1. Source: CVS Health internal data analysis. 2. CVS Caremark claims represent midpoint of guidance range. 3. Estimated managed claims include all CVS Caremark network claims plus specialty and adjusted mail claims. 4. All managed CVS Caremark mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal 30-day prescription. Slide 28 1. Source: National Business Group on Health, 2017 Large Employers’ Health Plan Design Survey, Figure 5.